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    Law of Demand

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    Cathy Pascual Nonato
    The document discusses the law of demand and the determinants of demand. It defines demand as the willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period. The law of demand states that as the price of a good rises, the quantity demanded falls, and as the price falls, the quantity rises, all else equal. The four ways to represent the law of demand are in words, symbols, demand schedules, and demand curves. The determinants of demand are income, preferences, prices of related goods, number of buyers, and expectations of future prices.

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    Law of Demand

    Uploaded by

    Cathy Pascual Nonato
    16 views4 pages
    The document discusses the law of demand and the determinants of demand. It defines demand as the willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period. The law of demand states that as the price of a good rises, the quantity demanded falls, and as the price falls, the quantity rises, all else equal. The four ways to represent the law of demand are in words, symbols, demand schedules, and demand curves. The determinants of demand are income, preferences, prices of related goods, number of buyers, and expectations of future prices.

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    The document discusses the law of demand and the determinants of demand. It defines demand as the willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period. The law of demand states that as the price of a good rises, the quantity demanded falls, and as the price falls, the quantity rises, all else equal. The four ways to represent the law of demand are in words, symbols, demand schedules, and demand curves. The determinants of demand are income, preferences, prices of related goods, number of buyers, and expectations of future prices.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    16 views4 pages

    Law of Demand

    Uploaded by

    Cathy Pascual Nonato
    The document discusses the law of demand and the determinants of demand. It defines demand as the willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period. The law of demand states that as the price of a good rises, the quantity demanded falls, and as the price falls, the quantity rises, all else equal. The four ways to represent the law of demand are in words, symbols, demand schedules, and demand curves. The determinants of demand are income, preferences, prices of related goods, number of buyers, and expectations of future prices.

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    © All Rights Reserved
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    of 4

    SUBJECT: MICROECONOMICS AND POLICY ANALYSIS

    TOPIC: LAW OF DEMAND AND DETERMINANTS OF DEMANDS

    Demand - It is the willingness and ability of buyers to purchase different quantities of a


    good at different prices during a specific time period.

    The Law of Demand

    - As the price of good rises, the quantity demanded of the good falls, and as
    the price of the good falls, the quantity of the good rises, ceteris paribus.
    P↑Qd↓

    P↓ Qd ↑

    Where P = price

    Qd = quantity demanded

    Ceteris paribus – all other things remain equal.


    DEMAND AND QUANTITY DEMANDED ARE DIFFERENT

    Quantity Demanded – is the willingness and ability of buyers to buy a specific


    quantity of a good at specific price.

    Demand is the willingness and ability of buyers to buy different quantities of a


    good at different prices.

    FOUR WAYS TO REPRESENT THE LAW OF DEMAND

    1. In Words

    As the price of a good rises, quantity demanded falls, and as a price falls,
    quantity demanded rises, ceteris paribus.

    2. In Symbols

    P↑Qd↓

    P↓ Qd ↑

    3. In a demand schedule
    4. As a Demand Curve

    Why does the Quantity Demanded Go Down as Price Goes Up?

    1. People substitute lower priced goods for higher priced goods


    2. Law of diminishing marginal utility – For a given time period, the marginal
    (or additional) utility or satisfaction gained by consuming equal successive
    units of a good will decline as the amount consumed increases.

    5 DETERMINANTS OF DEMAND

    1. INCOME – As a person’s income changes (increases or decreases), that


    individual’s demand for a particular good may rise, fall, or remain constant.
    For a normal good

    If income ↑ then D ↑

    If income ↓ then D ↓

    For inferior good

    If income ↑ then D ↓

    If income ↓ then D ↑

    For neutral good, remains constant


    2. Preferences – People’s preferences affect the amount of a good they are
    willing to buy at a particular price.
    3. Prices of related goods
    * substitutes – two goods that satisfy similar needs or desires

    P↑D↑
    *complements – two goods that are used jointly in consumption

    P↑D↓

    4. Number of Buyers
    More buyers, higher demand
    Fewer buyers, lower demand
    5. Expectations of Future Price

    REFERENCE:

    Principles of Microeconomics (10th edition)


    Arnold
    Pages 55-64

    Prepared by:

    Belinda Alima-Cruz

    Social Security System

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